The Evolution of Purchasing


Today’s guest post is from Lisa Nyce, Senior Project Analyst for Source One Management Services, LLC. Source One is a leading provider of sourcing consultancy and category management services.

Over the years, purchasing has become more strategy-oriented, rather than transactional. Purchasing professionals have evolved from the processing of traditional purchase orders and similar responsibilities to involvement in higher value and higher impact ROI projects. Technological advances enable purchasing professionals to offer so much more to an organization today. So sit back, buckle up, and get ready to navigate through a number of drastic transformations – we’ll show you how to become a more involved player by taking advantage of a shifting technological landscape.

Procurement pros have a growing number of tools in their arsenal to help make their lives easier and their projects more successful:

  • Spend Analysis Software – Get a better understanding of the Total Cost of Ownership (TCO) of goods and services. To get the most out of any software, the backing of the supporting department and program is essential. For example, with supplier relationship management software, a thorough strategy containing performance management and risk mitigation plans allows a software solution to serve with a full-circle advantage.
  • Cost Savings Tracking – identify cost savings opportunities and aid in the verification of implementation. Aside from the straight-forward benefit of tracking immediate cost savings, these tools can be used to remain competitive by ensuring that these savings are sustained over time and supplier rates remain locked at negotiated levels.
  • Supplier Report Cards – Ensure that expectations are being understood and met by both suppliers and internal stakeholders. These serve as an asset as new technology is presented and suppliers are scorecarded for future endeavors. As the technological landscape shifts, suppliers who don’t “keep up with the times” can be eliminated.
  • Stronger Legal Controls – minimize the need to involve a legal department or outside counsel when engaging in contractual negotiations. As heavily-regulated industries see a new or adapted regulatory climate, these legal controls assist in preventing penalties or a stigma attached to a brand as a result of internal or third-party noncompliance.

Purchasing has been incorporated into the more inclusive Supply Chain operation – it is no longer just a function of buying what is needed at the right time, at the right price with the right quality. Supply Chain activities encompass Strategic Sourcing, Supplier Relationship Management (SRM), Logistics, Planning and Quality. All of these new factors make purchasing a strategic function and the key to being able to meet or exceed the customer’s expectations.

New options abound for management and procurement professionals alike

Organizations have reduced the number of individuals required to get work done. Thirty years ago a typical Purchasing Department could include a Purchasing Manager, Buyers, expediters and clerks. That amount of manpower is simply not needed today. Electronic efficiencies have virtually eliminated clerical positions, and due to more efficient MRP systems, transactions are completed in less time allowing more time to source strategically, build stronger relationships with suppliers, and engage more with customers and stakeholders. Furthermore, employers today have many more options for staffing.

There are permanent, temporary, contract-to-hire, and various staffing options specific to the procurement industry. Procurement consulting is a viable option for companies wanting to obtain subject matter expertise on a particular spend category.

Likewise, supply chain professionals have access to a wider range of educational options to up their game: Logistics, Planning, Procurement, Supplier relations to name just a few. Not only are degrees available in Supply Chain but certifications from accredited institutions and groups are also available to a much greater extent.

The evolution of the Purchasing function has developed and will continue to do so. The change is necessary for organizations to continue to prosper. To stay ahead of the curve, remember to always monitor developments and consider what areas of improvement are possible – this will pave the way to not only personal gains but also further changes in the industry.

Thanks, Lisa.

Another Prediction LOLCat Can Get Behind

We all know what LOLCat thinks of futurists and their ideas. (Just see this post.)

But every now and again, someone comes along with an insightful, and true, prediction that LOLCat can get behind.

Earlier this year, LOLCat discovered an amazingly accurate prediction by Peter Smith (of Spend Matters UK) who, as summarized in this post, predicted that all predictions will be wrong.

However, LOLCat recently stumbled upon this great post by Pierre Mitchell who, in LOLCat’s view (and the doctor‘s view), predicted that “2015 Will be the Year of the Chief Buzzword Officer” [Spend Matters].

And it will. If you thought filling up your Buzzword Bingo card was easy last year, just wait and see what this year, the year of Procurement Damnation, brings. (In fact, this will likely be the year that Buzzword-Free Bingo hits the scene. Once your office mates get tired of filling their card before the boss takes his second breath, they will be searching for a game that lasts the entire hot-air filled meeting.)

What do you think LOLCat?

I Win!

Twenty Five Years Ago Today

The Big Mac Index went truly global when the first McDonald’s opened in the Soviet Union, only twenty-three years after the first international franchise was opened in BC, Canada, in 1967. By the time McDonald’s finally burst through the iron curtain, it was only two years away from reaching global restaurant domination, which it achieved in 1992 when it opened its first restaurant in Casablanca, Morocco and was able to claim a restaurant on all six continents.

When it comes to global supply management, few companies have the global breadth of McDonald’s and, except for a few global food companies, none are in the food and beverage business. But it shows what determination — and great supply chain management — can enable. (Especially if you’re not afraid of a little red.)

Technological Damnation #75: Mobile Movement

Two damning posts ago we wrote about influential damnation #75 Consortiums and how they were the damnation you couldn’t live with but yet couldn’t live without. However, consortiums are not the only damned-if-you-do but damned-if-you-don’t situation that you need to deal with this year. The other is the mobile movement.

Consumerization has been coming to supply management for almost a decade, heralded in by the likes of Coupa who lead the quest to bring B2C to B2B. And the current consumer craze is the mobile craze (which, by the way is so bad as a result of the social media frenzy that recent studies indicate that mobile devices are damaging 70% of relationships). It’s not just taking consumer sites by storm — every enterprise software provider and their doggy mascot are running around in circles trying to figure out how to implement mobile functionality in their supply management software suite.

This will be both a blessing and a curse. A blessing in that you will be able to access reports and key data on the go, your delivery personnel will be able to log deliveries on the go, and your customers will be able to check the status of deliveries on the go — but it will also be a curse. First of all, your ability to work anywhere, anytime means that you will be expected to work anywhere, anytime. Secondly, even small amounts of data entry will be painfully difficult due to small screens and even smaller keys. Third, the limited computing power and mobile bandwidth will make even simple processing tasks difficult and drive you absolutely crazy when you try.

And then there’s the social media craze that that’s going to ride the mobile movement bandwagon and bring a whole new level of craziness to the B2B world. You need to manage relationships with your suppliers, which means you have to manage relationships with your suppliers’ personnel — who believe that relationships are best maintained on FaceBook, that brief communiques are best delivered through Twitter, and that pictorial communications are best communicated through Instagram — on your phone. It’s mobile mania — and it’s going to take over your organization and your personnel. (And continue to ruin society.) Get ready!

Societal Damnation #44: Education Quality

Supply Management is hard. Real hard. And it’s only getting harder. SI has said it before, and it will say it again — in order to excel at Supply Management a Sourcing or Procurement professional has to be a jack-of-all-trades and master-of-one.

But this is not an easy thing to do. The skill set required by today’s Procurement professional is longer than Santa’s naughty and nice lists put together and is growing by the day. And that’s just the basics. The EQ, IQ, and TQ required for an average Procurement professional to get through the day is enormous. It’s to the point where a person of average intelligence can’t cut it. It used to be that only the best and brightest could do law and medicine and engineering but now only the best can do supply management. And, to make matters worse, just EQ, IQ, and TQ is not enough.

A modern Supply Management Professional needs knowledge — and lots of it. With constantly changing market conditions, new inventions, and new modes of operation, whatever a supply manager knows today is unknown tomorrow. As new methods of production come online, old methods become cost prohibitive. As new products are invented, old products become obsolete. As market conditions change, old plans become irrelevant.

Supply Managers need to keep tabs on the market. They need to identify new modes of production that will become more cost effective before they are under-cut by the competition; they need to identify new inventions that will threaten the organization’s market as soon as they are announced; and they need to detect market changes as they happen. They not only need oodles of market intelligence but the knowledge on how to interpret it. Not every new production technique is a threat, not every invention breaks existing or creates new markets, and not every market change has lasting effects — some are corrected in days. But others are atom bombs, iPhones, and extreme supply and demand imbalances caused by a major production plant being destroyed by an earthquake or tsunami.

But where is a Supply Management professional to get that knowledge? Most universities have a curriculum that is still mired in old-school logistics and operations research. Most professional associations are still teaching you old-school negotiating tactics. Most blogs are mired in the noughts and still preaching the gospel according to Ariba and Emptoris (which no longer exist). And the analysts … well, we’re not too sure just what they are inhaling before they do their preaching, tragic quadrants, and dangerous graves.

In other words, not only is education quality in general (especially in North America) bad, with the US ranked 14th (as per the global heat map published on pearson.com), but education in Supply Management in particular is particularly bad. We’re desperate for education, but almost no one is giving it to us. We truly are the damned. Let’s hope we can learn on our feet as we are dancing amid the flames. (As we no longer have the frying pan to shield us.)